Investment Banking vs Corporate Banking

Difference Between Investment and Corporate Banking

It is very important to have a thorough knowledge of the professions that you want to pursue. Knowing both the pros and cons can help in better comparisons of the professions. One should choose the profession carefully as a lot depends on it in life. Investment bankingInvestment Banking Investment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more helps in creating capital rather than handling it while corporate banking involves a range of banking services including loans, especially to companies. A career in investment banking would involve being in the limelight and earning more as compared to a career in corporate banking.

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Source: Investment Banking vs Corporate Banking (wallstreetmojo.com)

What is Investment Banking?

Investment banking involves providing a range of banking services like underwritingUnderwriting The underwriters take the financial risk of their client in return of a financial fee. Market Makers like financial institution and large banks ensure that there is enough amount of liquidity in the market by ensuring that enough trading volume is there.read more, raising capital for companies, issuing securities, and facilitating mergers. Investment banks act as an intermediate during raising capital funding. The investment banking basically involves two main sides vis-à-vis the selling side and the buying side. The selling side includes trading securities or monetary gain or portfolio gain and it also involves promoting securities or the research and underwriting while the buying side involves giving sound advice to clients on investment services.

Investment Banking firms are of three types – Bulge Bracket Investment BanksBulge Bracket Investment Banks Top 10 bulge bracket investment banks are - Blackstone, Goldman Sach & co, Morgan Stanley, J.P Morgan Chase & co, Bank of America Merrill Lynch, Credit Suisse, Citi, Deutsche Bank, HSBC, UBS.read more, Middle Market Investment BanksMiddle Market Investment Banks The deals of a mid-tier investment bank range from USD 50 million to USD 500 million. They offer the same services as the bigwigs, i.e. bulge bracket banks, but are not as geographically present internationally as they are.read more, and Boutique Investment Banking FirmsBoutique Investment Banking Firms The top boutique investment banks are - Perella Weinberg Partners (Global M&A Advisory – Boutique), Lazard (Global M&A Advisory), Rothschild (Global M&A Advisory – Boutique), Evercore Partners (Global M&A Advisory – Boutique), Greenhill & Co. (Global M&A Advisory – Boutique, Blackstone (Global M&A Advisory).read more.

What is Corporate Banking?

Corporate banking is also known as corporate financing. Corporate banking caters to large scale companies and businesses. They focus on a variety of banking services like issuing loans, setting up portfolios, helping MNCs by giving them options for lowering their taxes.

We can say that corporate banker closely studies the portfolios of his clients and ensure that financial risks Financial Risks Financial risk refers to the risk of losing funds and assets with the possibility of not being able to pay off the debt taken from creditors, banks and financial institutions. A firm may face this due to incompetent business decisions and practices, eventually leading to bankruptcy.read moreare minimized. There are numerous opportunities for commercial banksCommercial Banks A commercial bank refers to a financial institution that provides various financial solutions to the individual customers or small business clients. It facilitates bank deposits, locker service, loans, checking accounts, and different financial products like savings accounts, bank overdrafts, and certificates of deposits.read more. There are many positions for which you can work, for example, Credit Analyst, Loan Officer, Branch Manager, Trust Officer, and mortgage banker.

Investment vs Corporate Banking – Prerequisites

If you are an undergrad, then you should pursue an MBA from a business school and enter the sector of investment banking as an associate. The skills that you would want to inculcate in yourselves would include an in-depth understanding of corporate finance, quick calculation skills, and organizational analysis. Excellent communication skills are a must for a candidate looking forward to a career in investment banking.

A qualification in a subject such as law, business studies, management, accountancy, finance, mathematics, or economics can be advantageous, as can an MBA or similar professional qualification for having opportunities in corporate banking. Additional skills required for a career in corporate banking include numeracy skills, ability to solve problems, negotiation skills and ability to work under pressure.

Employment Outlook

There are many positions to acquire in the field of the investment banking sector including:

Analyst: The Analyst is the basic profile in investment banking. The main roles of an analyst involve creating financial models, perform a company analysis, do due diligence, create pitch booksPitch Books Pitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm's main attributes and valuation analysis, which helps them decide whether or not to invest in the client's business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm's sales department to help them sell products and services to a client.read more, and punch in data. You have to have at least 1-year experience as an analyst before you apply for the post of an associate.
Associate: The main job roles of an Investment Banking associate are almost similar to that of an analyst except for the additional responsibility of acting as an intermediate between junior and senior bankers. You are required to be an associate for 3 or 4 years before being promoted to the post of Vice President.
Vice President: Vice President is just one level below the position of managing director. Vice President monitors his associates and performs many crucial tasks in the investment banking sector. The vice president has to hold up his position for a minimum of 2 to 3 years before landing up as a managing director.
Managing Director: Managing directors are usually highly experienced candidates that represent the firm in foreign countries and in important meetings. He has the power to take all the strategic decisions of the company.

Unlike investment banking, there are no levels in corporate banking but one can work in the following positions:

Loan Officer: A loan officer decides whether a client is eligible for a loan or not. He monitors the customer’s financial conditions and gives him the best suitable loan for him.
Branch Manager: Major Job roles of a branch manager are supervising employees, taking care of the smooth selling and delivery of financial services, and maintaining business relationships.
Trust Officer: The main focus of a trust officer is areas like trust services, estate planning, taxes, investment, etc.

Compensation

Recent research shows that investment bankers earn more money than corporate bankers. An analyst in investment banking can earn as much as $70,000 as their base salary. As an associate, your basic compensation would be $100,000. A vice president would earn $250,000.

Entry-level jobs in the corporate banking sector will pay you $30,000 to $40,000 per year. Having three years of experience can result in an increased compensation of $54,000 to $86,000.

Investment and Corporate Banking – Pros & Cons

Investment Banking
Pros		Cons
Handsome pay		Long working hours
Limelight		Cutthroat competition
Steep learning curve
Corporate Banking
Pros		Cons
Flexible working hours		Compensation is hard-earned
Easy exit options		No appreciation
Defined career path